Company pension scheme: Also for employees in smaller companies

The German government wants to strengthen company pension schemes. It has adopted measures to ensure that employees in smaller companies and low-income earners also benefit. However, the situation remains complex.

The Bundestag has passed the Second Company Pension Strengthening Act passed away. company pension scheme (bAV) The aim is to significantly expand access to social security, particularly for small and medium-sized enterprises (SMEs) and low-income earners. The cabinet approved the draft legislation on September 3, 2025; the Federal Council still needs to give its consent, after which the law can come into force in 2026. 

Currently, half of all employees in Germany subject to social security contributions have a company pension (52 percent). However, it is still not very common in small and medium-sized enterprises and among low-income employees.

The German government intends to further promote company pension schemes. It plans to achieve this through improvements in labor law, financial supervision law, and tax law.

The Central Association of German Crafts However, the association is skeptical whether this will succeed. In its statement of August 7, the association emphasized that the law contains sensible measures. However, the entire topic of company pensions is very complex overall. This could still be an obstacle for small and medium-sized enterprises. Furthermore, the association finds the lack of a "limitation of
Employer liability in the case of defined contribution plans with minimum benefits and defined contribution benefit plans. 

Key innovations at a glance

✔️Expansion of the social partner model: Small and medium-sized enterprises can join existing social partner models without having to negotiate their own collective agreement. This is intended to reduce bureaucracy for the company while simultaneously offering an attractive option for employees.

✔️ Greater flexibility when changing employers: Pension entitlements should be easier to transfer when changing employers or to remain in the pension institution without complications.

✔️ Financial supervision/investment rules: Pension funds and other pension providers will be given more leeway in their capital investments in order to achieve higher returns and thus higher pensions.

✔️ Tax improvements for low-income earners: The income limit for the subsidy will be raised; the maximum subsidized employer contribution will also increase. 

✔️ Digitalisation of occupational pension schemes: The plan includes streamlining processes to reduce administrative burden and bureaucracy for businesses.

The improved funding conditions and easier transfer of pension entitlements could increase the attractiveness of company pension schemes as Tool for employee recruitment and retention Promote this. For concrete implementation steps, entrepreneurs should contact tax advisors or external occupational pension specialists.

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